What is CGST, SGST and IGST

Since GST subsumed both indirect taxes of central government (excise duty, service tax, custom duty etc) and state governments (VAT, Luxury tax etc), both of the government now depends on GST for their indirect tax revenue. Therefore the GST rate is composed of two rates, one of CGST and one of SGST. Therefore while making intra state sale (i.e within same state), CGST collected will go to the central government and SGST collected will go the respective state government in which sale is made.

For eg:- A dealer in Punjab sold goods to the consumer worth Rs. 10,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in such case the dealer collects Rs. 1800 and Rs. 900 will go to the central government and Rs. 900 will go to the Punjab government.

GST is a consumption based tax i.e the tax should be received by the state in which the goods or service are consumed not by the state in which such goods are manufactured.

Now, IGST is designed to ensure seamless flow of input tax credit from one state to another. It is designed so that a state doesnâ€™t have to deal with every other state to settle the tax amounts and a state has to deal with only centre government.

Therefore in case of interstate sales (i.e from one state to another state) is made then seller will charge IGST in place of CGST + SGST.

For eg:- A dealer in Punjab sold goods to its dealer in Rajasthan worth Rs. 1,00,000. The GST rate is 18% comprising of CGST rate of 9% and SGST rate of 9%, in such case the dealer has to charge Rs. 18,000 as IGST.